The court has once again ruled that virtual asset lending businesses, such as those involving Bitcoin, are not subject to the Loan Business Act and Interest Rate Restriction Act, which set caps on interest rates.
According to the legal community on the 19th, the Seoul High Court Civil Division 17-2 (Presiding Judges Cha Mun-ho, Oh Young-jun, Hong Dong-gi) ruled in the appeal trial of a virtual asset claim lawsuit worth about 800 million KRW filed by virtual asset fintech company A against company B, upholding the lower court's partial ruling in favor of the plaintiff.
Earlier, from October 2020 to January of the following year, company A lent 30 Bitcoins to company B under a 'virtual asset lending contract' and received interest payments of 1.5% per month in Bitcoin.
Subsequently, each time the contract was extended, the interest rate sequentially increased to 2.5% per month and then 10% per month. However, company B failed to repay the Bitcoins properly, leading company A to file a lawsuit.
During the trial, company B argued that "company A violated the Interest Rate Restriction Act and the Loan Business Act" and claimed that "interest paid exceeding the maximum interest rate should be considered repayment of the principal (Bitcoin)." The interest agreed upon at the initial contract, when annualized, amounts to 60%, whereas the current Interest Rate Restriction Act caps the annual maximum interest rate at 25%, and the Loan Business Act at 20%, thus alleging illegality.
The first trial court ruled in favor of company A, stating that "Bitcoin is not money" and "company B must deliver 30 Bitcoins and the Bitcoins calculated according to the interest rate to company A."
The first trial court explained, "The Interest Rate Restriction Act and the Loan Business Act limit the maximum interest rates on monetary loans and lending of money. Since the subject of this contract is not money but Bitcoin, these laws do not apply."
Furthermore, the court ruled, "If company B cannot pay the Bitcoins, it must pay the equivalent amount in cash calculated at the market price of approximately 26.54 million KRW per Bitcoin at the time of the conclusion of the first trial."
In the second trial, company B also argued that the contract exceeded the statutory interest rate of 6% per annum under the Commercial Act, but this was rejected on the grounds that "there is no reason to consider the interest agreed upon by both parties as violating the law."
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